Sansei

Pl chk out this thread

]http://dreamhomeinpune..com/2009/08/you-can-build-your-own-dream-home.html?showComment=1250056971039#c2852733956544 403128[/URL]

realacres

Kumar Papillion at Pashan has been abandoned. Even no work is seen at Kapil Aasmant. Expect more such cases in coming days.

Sansei

With no Tax benefit, the investor should start dumping and look for greener pastures may be commodities. Genuine home buyers can have respite with fair prices now.

amit_2009

The govt will be taking away the tax benefit with the new tax code on interest repayment of housing loans...

Sure the govt. is doing the right thing, by making people buy with real money. Unlike in the USA where loans were available at even 3% and upto 100% of the assessed property value!

Just waiting for the Regulatory body for real estate to be formed in India...

ash7979

In USA loan are available at 3% then deposit rate also is not more the 2-2.5% or even lower than that so, loan rate linked to what your deposit yield for you if you keep your money in Bank & loan rate not be less than this rate...

So, you can not compare loan rates in US with loan rate in India or say to any country...

__________________
Cheers,
-Ashish

realacres

http://www.livemint.com/2009/08/1222...using.html?h=B

wiseman

Realacres,

The number is attractive and there are many hurdles from here to there ...

This is a nw trick of the modern analysts who use these tantalising numbers to drum up some TRPs for themelves. Then there are the marketing chapswho come next and use these numbers to suit their pwn purpose. Let us see ...

First of all, India's unmet housing demand has always been in the millions for decades. Did that automatically mean all these millions of houses got built?

Second, get into the numbers in detail. There are 2 relevant facts buried in there. The maximum demand, as per the analyst, is in the 3-6 lakh income earning population. I'm assuming here that a good part of this segment would be just getting into a family segment or would have got into it recently.

If you notice, I had used a 5L income level and figured that the new tax proposals would leave little extra for this segment to be motivated extra to go into housing, any more than they already are!

Second, the homes looked at is 15L in cost. Given the price of land today, the analyst doubts to what level private builders can cater to this price levels with any level of profit.

We must all realise that much of housing in India is done by private builders. To be able to get onto the "affordable" cost housing, they first have to get rid of all the inventory on their hands which is bleeding them with high debt and interest costs.

So, they first have to sell all the 40 - 80 lakh housing before they can dream of making it big in the affordables segment! How?

Then they have to take all their costly land banks and build low-price housing on it and end up with a cost structure that will leave little profit if they have to sell at the 15-20L levels.

Additionally, they have to get very low-cost debt to be able to control costs to keep prices to 15-20L levels.

If this Industry becomes so unattractive (reasons above) with little profits and difficulty in raising capital at low cost, funds will stop flowing into this sector, thereby making all that 2 million homes only a dream. This is why, even after 62 years of independence we still have a large , unmet demand for low-cost housing. Its simply unviable for most builders.

The only reason they are all talking about it is their desperation to clutch at any straw to get them out of this killing debt load!!!

Which explains why, in the boom period of 2004-08 not a single one of these stalwarts said the word "affordable" even once!!! They were too busy shafting all the buyers of fancy housing with all kinds of crazy facilities while laughing all the way to the bank.

LEt us revisit this housing demand in 2011. We will still have an unmet demand of 3 million affordable homes!!! And we will still be talking about it!

cheers

Sansei

The new Govt draft Tax code takes away all incentives for house building.

In that it shooe's away speculators.

It provides for more money in hands of all people rather than home owners

If u c the tax structure, all the sub 10 lk category are paying just 10% so now the affordable house becomes more affordable. It gives abt 8-10 k additional income for 10 lk income in hands of a person.

So bldrs have to now structure their house for this category. Even the priority loans for banks are falling onto this bracket. so Govt is indirectly pushing for this sector.

realacres

Well said wiseman & sansei.

Wiseman, agree with what you say but who jacked up the RE rates including land at first place? Builders. The price of flats went up & thinking that prices will always go up, builders wanted to sell as much as possible, hence they bought land at higher cost as the land owners then started demanding their pound of flesh from the builder.

Hence,
High cost of flat>> Increase in land price>> Increase in flat prices.
It is a viscous circle.

Today, the value of land banks given as collateral by big builders like DLF,Omaxe, Unitech etc. has fallen by over 55%. DLF even sold it's land at much cheaper cost than market price in May 09.

In Baner. a plot which was going for INR 2100/sq ft is now available for INR 900/sq ft!! Similar cases are there even in eastern parts of Pune.
Builders can still make flats at 15L even today, what they won't earn is the 300%+ profit which they make.

* Most of the builders had purchased land at throw away rates before the boom period! Areas like wakad & Balewadi had price of sub-INR 100 sq ft for land. Not to forget agri land purchased at even lower rates & later converted to NA.

wiseman

Folks,

I have always maintained that anything overpriced must correct to an affordable level. This is called reversion to the mean!

There is this common belief that land is immune to it. Why? There is no reasonable explanation given to accompany that belief. Its like, my mother always did this, so we continue!!!

**********************************
There is this story about preparing turkey for thanksgiving (its a US story, so vegetarians excuse; I too am a veggy). Following tradition, the daughter of the house snipped off the end of the turkey (considerable snip and so a considerable waste) and put it into the oven. The hubby, married into the family and so not knowing the tradition, asked, "why did you do that and waste so much, especially given the price of turkey"?!

Daughter(wife) said, "thats always been the family tradition and so I follow it"! So, hubby went to mother-in-law and asked, "why do you do that"? She say, "my mother always did it and so I follow the tradition"!!

Finally, hubby goes to grandmother (in those days they lived a long life) and asks, "why"?

She says, "simple! so that it would fit within the pan which is too small"!!!

Note: While many traditions have a sound reasoning which we may have forgotten, not all of them are sound in their basis!!! We need to question each tradition not to disrespect it, but to see if it has a sound basis!!!
*******************************

So, while builders and landowners misused their position and duped buyers into high prices with stories like "land is not being made again", etc, all they did was play to the fears and greed of human nature. Fear that land will run away never to return to a price we can afford. Greed that, if we are the first to book, we can flip it after 6 months for a 50% profit.

When this cooked up demand deflated, the builders who fell for these stories themselves are now left holding high-priced land with no demand. They can't hold it indefinitely as it costs money!!! So, this land has to come to market and has to get sold at lower prices.

> In Baner. a plot which was going for INR 2100/sq ft is now available for INR 900/sq ft!! Similar cases are there even in eastern parts of Pune.

So, I continue to wait for this inventory to be cleared out with continuously declining prices as weakened land-owners on debt are forced to sell at lower and lower prices. I will buy when it is affordable to me! I may miss the bus waiting, but at least I will not make the bigger mistake of holding high-priced RE and paying thru my nose to builder and banker so that they can ride in their Mercs!!! Plus, when I buy the market will have bottomed and prices will be on the rise, so my investments are safe and readily saleable!

cheers